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THE ROLE OF COMMERCIAL
BANKS IN AGRICULTURAL FINANCING
ABSTRACT
The object of this study is to
determine the vital role played by commercial banks in Agricultural financing
in Enugu State which has been a major handicap to agricultural development
today.
The study arose from the fact the
guest to achieve self sufficiency in food production which is the greatest and
highest priority area facing most of the world’s people today. Apart from the
role of oil economy today, agriculture still remains the major stay of the
Nigeria Economy as it provides majority of the populace with employment, income
and food.
As a business venture, it cannot be
executed extensively unless funds is available for replacement and capital
equipment procurement to enhance a quicker, clearer and more comprehensive of
the important of this study. This work is divided into three chapters. Chapter
one deals with statement of problem, brief history of Afribank PLC purpose and
significant of the study scope and limitation of the study and definition of
terms
Chapter two deals with review of
related literature which includes policy and means to boost agricultural
scheme, types of loan factors and risk in agricultural financing and costly
constraints to agricultural financing
Chapter three deals with findings
recommendation and conclusion.
CHAPTER ONE
INTRODUCTION
Agriculture can be define as the
science or practice of farming i.e. cultivation and integration of live-stocks
and production of raw materials for industries. It is well known that farming
is the oldest occupation in the world and indeed it remains till date, one in
which the largest number of people are engage. The vast majority of the
population of the world, depends on its more complex since, agriculture is
basically concerned with the production of food which is basic necessity of
life.
The problems of capital scarcity in
agricultural production in most developing nations are generally giving cause
for involvement. As of the huge capital elopement, subsistent agriculture now
cultivate crops only for their selves and their immediate families, hence the
need for commercial bank to participate actively in agricultural financing
materials for key industries and a major foreign exchanged earners has further
added to its prominence among all human occupation. As a business, it cannot be
carried out intensively unless funds are available for maintenance, replacement
and capital equipment procurement and other expenses.
THREE TYPES OF CREDIT
ARE USUALLY REQUIRED.
a. Short Term Credit to financial yearly
planting operations, seeds, fertilizers and farm expenses until the crop is
sold. The amounts involved here might not be large, but inadequate of this type
of credit is most predominantly felt by small farmers who have little or no
savings upon in which to hang on.
b. Medium Term Loan (longer than one planting
year but less than three year). This is need for acquisition a breeding stock
and cheap with relatively short little.
c. Long Term Credit necessary to acquire
major machines and equipment repairs and maintenance of farm lands building,
storage facilities etc. the role of credit finance in promoting development in
the country is well known in recent times, government has devoted lot of
financial resources to the agricultural sector in order to boost food
production through it’s lending policies to commercial banks as well as the
establishment of certain agricultural schemes.
1.2 STATEMENT OF THE PROBLEMS
In this age of expanded business
activities around the world especially in Nigeria Agriculture is more than ever
needs financial assistance in form of bank loans to meet the increasing need
for food production. Obtaining such loans however has not be easy for farmers.
Largely as a result of collaterals security, lack of proper accounting records and management
among other limiting factors.
Inspite of the importance of oil in
the economy today, agriculture still remains the main stay of the Nigeria
Economy as it provides the greatest avenue for employment, income of food for
the Nigerian populace. It’s internatic position as a source of raw materials
for agricultural credit.
Agricultural credit therefore is a
necessary ingredient in agricultural practices and in farm productivity
especially if supplied on sufficient quantity and efficiently used. However,
credit is only one of the “essentials for expansion and modernization, for
credit parse, is not entirely inevitable, but a necessary key to a more
prosperous future.
The commercial banks on their part
has been placed what might be an optimal level in banking lending. The
customers who has over the years been playing the expectations role, does not
wish to continue that way and thus assumed an advisory role in the light of the
above that thus study undertaken to provide some solutions to the numerous
problems associated with commercial banks loans especially to the agricultural
sector.
1.3 BRIEF HISTORY OF AFRIBANK PLC
Afribank Plc acquired
license to operate as a financial institution on October 20, 1959. and opened
its first branch at Kano city on January 4, 1960, she has at that time known as
Banque international four L’ Afrique Accidentally (BIAO). The origin of (BIAO)
dates back to around 1853 when the bank has first established in Senegal. Later
this was changed to Banque Pail Afrique accidental (BIAO). The word
international was added later when the banks ownership include the National
City bank.
BIAO was one of the
first banks to set up shop in West Africa at a point, the banks activities in
the areas were prevailing that she was given the authority to issue current note (A central
bank duty) in the French speaking west Africa countries Afribank Plc then IBWA
was established as a subsidiary of (BIOA)
In compliance with order of the
federal government , the bank headquarters was in 1960 set up at 9th broad
street, Lagos it has remained there till day. The establishment of Afribank Plc
then IBADAN, concluded with the emergence of the countries oil industry. The
bank soon developed links with some oil companies and is order to serve their
need more promptly, the bank set up two more branches in Port Harcourt and Aba
First before the out break of the civil war in 1967. with the promulgation of
the Nigerian companies decree in 1968, it became expedient for all farms operating
in Nigeria to be incorporation as Nigerian companies. On May 30, 1969 (BIAO)
was incorporated in the country as a limited liability company under the
national international bank for west Africa (IBWA) the English equipment of
BIAO). In 1997, the bank got her first Nigeria Chairman, in the person of
Alhaji T. Galadima on the same year, BIAO herself experienced changes in her
own quity structure. The union bank of Switzerland bought over 20 percent of
the 49 percent of the BIAO equity capital held at that time by citizen bank U.A
further 20 percent of the portion was taken up by Banko Brasil, while the
remaining percent was brought by the compigne international Africarne de Banque
holding S.A. Luse-emboury
On account by the indigenization, the
federal military administration which was in place at that time in Nigeria, in
the year 1976 acquired 60 percent of equity structure of Afribank plc and some
other banks.
1.4 PURPOSE OF THE STUDY
It is a living concept
among the people today that low returns to agriculture is entirely as a result
of lack of finance. It is against this background supported by the statement of
problem that the researcher wishes to identify and analyze other issues raised
along side finance (capital) as could be seen capital is the life wire of any
ventures whose capital base is shaky could be said to be in serious jeopardy.
It is this singular factor that is
lacking therefore other numerous problems like labor turned over, adequate
training, like learning of new agric skills and higher marginal production per
worker will automatically develop.
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